Markets set for a choppy ride

Asia closes in green, but America and Europe were volatile amid uncertainty over stimulus

After Monday’s sharp fall in global and Indian equities, the major stock markets in Asia and America saw some bounceback on Tuesday.

The markets in Europe ended in the red after being in the positive zone for most of the day, as they saw selling in the latter part of the session as the US markets, which surged on opening, dipped into the red within two hours of trading.

This indicates the choppy nature of global markets, and the Indian markets, which were shut on Tuesday because of Holi, could remain volatile till uncertainties over coronavirus and global growth go. The leading indices in Japan were up about 1 per cent, while Hong Kong’s was up 1.41 per cent and China’s by 2.14 per cent.

In Europe, Euro Stoxx 50 Pr, the UK’S FTSE 100, DAX, CAC, etc were all up between 1.5 per cent and 2 per cent during the day, but closed lower by 0.1 per cent to 3.2 per cent.

The Singapore-based SGX Nifty Futures were up by 0.53 per cent (55 points) at 10,515 on Tuesday, 11.15 pm India time.

“The one thing that is of certainty for equity markets around the world is that they will remain volatile. The volatility index for most indices has climbed to stratospheric levels. The corona epidemic will continue to rise as more test results come out and more lockdowns are likely,” said Naveen Kulkarni, chief investment officer, Axis Securities.

Italy, which had closed certain parts earlier, has now extended the lockdown to the entire country amid the spread of coronavirus.

Other experts also share a similar view. The Indian markets could open mildly lower on Wednesday if the US markets are not able to hold on to or build on early gains, says Deepak Jasani, head of research-retail, HDFC Securities.

Jigar Shah, chief executive officer, Maybank Kim Eng Securities, said: “There are multiple factors that will weigh on the markets.”

“Oil prices, coronavirus, and the recovery of Chinese growth, which will affect global growth and oil prices. The markets are in oversold territory, but time correction can last longer than price correction,” Shah said.

Reliance Industries, which is a key index component, however, could recover some lost ground (and support indices) because Saudi Aramco’s stock price rose 10 per cent following its announcement of supplying more than 25 per cent more oil in April over March, said Jasani.

The prices of key commodities such as crude oil were up over 8 per cent, or almost $3 a barrel, which is some bounce-back after Monday’s $11 fall. Gold was down 1.2 per cent at $1,655 an ounce on reduced demand for safe havens.

Some experts, though cautious, see recovery in the Indian markets.

“In the short term, the markets should see some recovery because major global oil producers such as Russia are showing willingness to talk to other oil producers. However, they will continue to see volatility,” said UR Bhat, director at Dalton Capital Advisors.

Bhat said the markets were unlikely to fall back to Monday’s lows in a great hurry.

Jyotivardhan Jaipuria, founder and managing director, Valentis Advisors, said: “Given the recovery seen in the key international markets, the Indian bourses could also see recovery in Wednesday’s session.” This depends largely on what the US announces on the proposed fiscal stimulus, he added.

The stock indices in the US rebounded on Tuesday in initial trade, rising between 2 per cent and 4 per cent, a day after one of the worst falls after the global financial crisis in 2008.

The gains were on reports that the US and other countries will announce stimulus measures to lift sentiment and economic growth. However, the sell-off that followed over the next two hours of trade was because the markets were not sure of how soon the stimulus would be announced.

At the time of going to press, the US indices were up between 0.5 per cent and 1.3 per cent.

Experts, however, believe these corrections and volatility could offer good opportunities for Indian investors to buy from a long-term perspective.

“While global linkages do remain an overhang on the Indian markets, the sharp correction in oil offers a very good opportunity for India because many of our worries are addressed when oil stays in the $5060 range,” said Krishna Sanghavi, chief investment officer (equity), Mahindra MF.

On Monday, India’s Nifty index plunged 538 points, or 4.9 per cent, to 10,451.45 points, while the BSE Sensex was down 1,941.67 points, or 5.17 per cent, to 35,634.95.